We fall off our chairs when we hear some of the salary demands. You almost start to think that as an employer you have little choice left. There's hardly anyone out there already, and you also don't want your people to walk away because of fancy offers from competitors. Should you now start mandatorily raising all salaries by 6% because the inflation rate is so high (and will be for a while)?

Despite all the news stories about war, inflation and labor market tightness, we think you should be cautious about (large) salary increases.

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Are your salaries not covered by a collective bargaining agreement and are you free to do as you please? The following 5 tips can help you find this balance:

• Always use benchmark data to base any wage increase on. To do this, keep your eyes open for developments in the market and do not be directly guided by media reports. Moreover, do not forget that the government also tries to monitor purchasing power by compensating for price increases of basic products.

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• If you have a salary house with a minimum and maximum per scale, you can increase these salary scales according to inflation. This gives more room on an individual basis. Never start structural salary increases based on inflation. Always look at each individual to see if they deserve a raise based on performance and the market.

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• People need to be paid a market-based salary in order to feel treated respectfully. With a (periodic) benchmark, you know what is happening in the market and whether the salaries you are offering are still in line with the market. In doing so, you have the choice of paying below, at or above market. Make this choice consciously and make sure you tell a clear story to people.

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• Make sure you have good ground rules with equal pay and opportunity for all. Most importantly, have a clear story to your people how your compensation strategy is structured, what you as an employer think is important and how you want to pay relative to the market and why.

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• Now more than ever it is important to know how your people are doing. Pay attention to this because it's never just about financial reward. The core is in appreciation. Do you really pay attention to how someone is doing? Think about training and offering advancement opportunities. But also think of things like flowers when someone is ill or a personal trainer in the run-up to an important sporting event your team member is training for. The fact that you have thought about what suits that person is what matters!

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Are your salaries covered by a collective bargaining agreement?

Should your company be covered by a mandatory collective bargaining agreement, chances are that there are already legal agreements in place regarding wage increases due to inflation. Use this as a guideline for salary increases rather than doing it yourself.

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We wish you much wisdom, and take another look at whether you are a good company to work for? People are increasingly choosing a company with a positive impact on the world, with a compelling purpose and with a culture where you can learn a lot.

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Would you like to spar with one of our People Partners about this? Then get in touch with us! Or read here how we dealt with inflation correction.

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